The following ongoing property taxes are payable in the US:
US Income Taxes – Rental income generated by a non-resident in the US must be divided
into one of two categories:
- Income effectively connected with a trade or business in the US and
- Income not effectively connected with a trade or business in the United States
- Income which is not effectively connected with a business or trade is taxed at flat
rate of 30% whereas
effectively connected income is taxed on a scaled rate basis dependent on the level
of income with allowable
- Two methods of taxation are available when rental income is received in the US:
- Cash basis method – expenses are deducted as they are received
- Accrual method – income is reported as and when it arises as opposed to when it
was actually received
and expenses declared as they occur rather than when they were paid.
US Capital Gains Tax
Non-residents are liable to capital gains tax on the gain made from the sale of
a property after allowable deductions. For properties held for more than one year
a lower CGT rate applies.
The long-term CGT rate was reduced to 15% in 2003, or to 5% for individuals in the
lowest two income tax brackets. Short-term capital gains are taxed at the ordinary
income tax rate. The reduced 15% CGT was due to expire in 2008 but was extended
until 2010. It is expected that the rates will revert back to pre 2003 rates where
CGT was typically 20%. There is a considerable speculation about what will happen
to the US CGT rate in 2011 given the current economic conditions in the US.
The buyer of a property retains 10% from the agreed sale price as a withholding
tax which is paid over to the IRS to cover the sellers' tax obligations.
The seller submits a balancing statement to determine if there was an overpayment
in which case a tax refund would be due.
US Gift Tax
When a property is gifted to a family member, associate or friend a gift tax may
US Estate Tax
A deceased person’s estate may be liable to an estate tax payable on the gross value
of the estate after allowable deductions.
US Tax Filing Deadline – The deadline for filing an annual US tax return is the
15th of April – declaration applies to income received in the previous calendar
year. The IRS will allow for extensions under certain conditions. Non-resident property
owners with rental income not effectively connected with a trade or business in
the U.S. will receive an extension until the 15th of June to submit their annual
Property Tax International specialise in the preparation and filing of US tax returns.
We ensure your property’s profit potential is maximised by minimising your tax liability.
Individuals are generally required to declare their worldwide income within their
annual resident income tax return. The USA has a double tax treaty with a substantial
number of countries around the world. Most double tax treaties provide relief for
taxes paid in one country against tax due on the same income in the taxpayer’s tax
resident country. Property Tax International strongly advise that you consult with
the tax authorities in your home country to determine if your resident tax country
has a Double Tax Treaty in place and what income is covered under the agreement.
Property Tax International Limited makes every effort to ensure that the
information contained herein is accurate, we take no responsibility or liability
for any inaccurate, delayed or incomplete information, nor for any actions taken
in reliance thereon. The information provided above is intended as a guide only.